Direct Mail Services, Inc. v. State of Colo.

• Decision Date: 10 January 1983
• Docket Number: No. 82-K-1461.,82-K-1461.
• Citation: 557 F. Supp. 851
• Parties: DIRECT MAIL SERVICES, INC., a Colorado corporation, and Marvin W. Shaver, a/k/a Wally Shaver, Plaintiffs, v. The STATE OF COLORADO, et al., Defendants and Third-Party Plaintiffs, v. Keith E. BEST, Third-Party Defendant.
• Court: U.S. District Court — District of Colorado

557 F. Supp. 851

DIRECT MAIL SERVICES, INC., a Colorado corporation, and Marvin W. Shaver, a/k/a Wally Shaver, Plaintiffs, v.The STATE OF COLORADO, et al., Defendants and Third-Party Plaintiffs, v.Keith E. BEST, Third-Party Defendant.

No. 82-K-1461.

United States District Court, D. Colorado.

January 10, 1983.

Jeffrey R. Edelman, Denver, Colo., for plaintiffs.

Jeffrey B. Stalder, Hall & Evans, Denver, Colo., for the State.

Harold D. Torgan, Torgan & Associates, Denver, Colo., for Best.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

This action arises out of condemnation proceedings between the State of Colorado and third-party defendant Best pursuant to the state's power of eminent domain.Plaintiff, Marvin W. Shaver was the lessee in a lease dated October 31, 1977 of the property located at 2055-75 South Santa Fe Drive, Denver, Colorado.Plaintiffs' complaint contains four claims for relief: wrongful taking of the leasehold estate by the State of Colorado and the United States government;¹ trespass; violation of plaintiffs' civil rights under 42 U.S.C. § 1983, et seq. and a denial of right to just compensation under the Fifth and Fourteenth Amendments to the U.S. Constitution; and, civil conspiracy by two or more of the State Highway Department employee defendants to deprive plaintiffs of their just compensation for the taking of the property rights, a violation of 42 U.S.C. § 1985, et seq.All parties have filed motions for summary judgment which have been briefed and are ripe for determination.

On October 31, 1977, plaintiff and third-party defendant Best entered into a written lease and addendum for the property located at 2055-75 South Santa Fe Drive.The lease was to run from January 2, 1978 to December 30, 1987 at a rental rate of $800 per month for the first five years and $1,000 per month for the subsequent five years.The lease was tied to a sale of the business of Direct Mail Services, Inc. from Best to Shaver.The addendum executed the same day and incorporated and made a part of the lease said at paragraph 12:

Effect of Condemnation.Rights and duties in the event of condemnation are as follows:

(1) If the whole of the demised premises shall be taken or condemned by any competent authority for any public or quasi-public use or purpose, this lease shall vest thereby in that authority and the rent reserved hereunder shall be apportioned and paid up to that date.

(2) If only a portion of the land in front of the demised premises shall be taken or condemned, this lease and the terms hereof shall not cease or terminate, but the rent payable after the date on which Lessee shall be required to surrender possession of such portion shall be reduced in proportion to the decreased use suffered by Lessee as the parties may agree or as shall be determined by arbitration.

(3) In the event of any taking or condemnation the resulting award of consequential damages with regards to the buildings and premises shall belong to Lessor.Awards of consequential damage for major improvements effected by mutual agreement between Lessor and Lessee and such awards for loss of Lessee's business, moving expenses, etc. shall belong to the Lessee.Lessee shall have the right to pursue settlement from the condemning authority as a separate action from any claim the Lessor might negotiate with said condemning authority.

On April 26, 1979, pursuant to its powers of eminent domain, the State of Colorado acquired the "whole of the demised premises."A special warranty deed was executed by the parties.On July 15, 1979, the state and plaintiff Shaver entered into a lease for the premises.This lease was to run for two years beginning July 1, 1979 and ending July 1, 1981.Rent under this lease was $770 per month.Plaintiff states that the fair market value of the leased premises was $1,616 per month.Shaver terminated this lease in July, 1980, and vacated the property August 25, 1980 in favor of other premises (the Ashton or Navajo property) leased August 1, 1980 to July 31, 1983 at $1,590 per month which could then be renewed until July 31, 1985 at a rate of $1,800 per month.Plaintiffs maintain that this property contains more square footage than they need.Plaintiffs seek damages for the loss in the fair market value of the leasehold plus the difference between the Best property and the Ashton property, an order requiring defendants to engage in inverse condemnation, compensatory and punitive damages for the alleged trespass and damages for the alleged wrongful taking and denial of just compensation.Plaintiffs ground this court's subject matter jurisdiction under Title 28 U.S.C. § 1346(b), and bring the action under the Fourteenth Amendment to the U.S. Constitution,Title 42 U.S.C. § 1983,28 U.S.C. § 2201 and pursuant to Rule 65, F.R.Civ.P.

PLAINTIFFS' FIRST CLAIM FOR RELIEF

Plaintiffs' first claim for relief alleges a wrongful taking of plaintiffs' leasehold estate for public use without just compensation in violation of the Colorado and federal constitutions.Plaintiffs seek an order requiring the defendants"to engage in inverse condemnation proceedings," for damages for loss of the fair market value of their leasehold estate and the difference between the Best property rental and the Ashton property rental.Both plaintiffs and defendants have filed motions for summary judgment on this claim.

Defendants rely on the language of paragraph 12 of the addendum to the lease and argue that plaintiffs have no right to inverse condemnation.Defendants argue that with the condemnation and the transfer of the property from Best to the State of Colorado under the warranty deed of April 26, 1979, all Shaver's legal interest in the property and rights to any award of compensation terminated and that summary judgment must be entered in their favor on this claim because plaintiffs have failed to state a cause of action against them.

Plaintiffs contend that they have asserted a meritorious claim upon which relief can be granted.They argue that their leasehold interest is a property right as defined under the Fifth Amendment to the U.S. Constitution and may not be taken without just compensation.Plaintiffs argue that because the state has not commenced condemnation proceedings against plaintiffs' leasehold estate but has deprived them of that estate, they are entitled to inverse condemnation and just compensation for the taking.

The power of eminent domain is an inherent attribute of sovereignty limited only by applicable portions of the state and federal constitutions.The exercise of the right of eminent domain is the exercise of the sovereign power.People of Colorado v. District Court,207 F.2d 50(10th Cir.1953);City of Thornton v. Farmers Reservoir & Irrigation Co.,194 Colo. 526, 575 P.2d 382(1978).The determination of necessity is an essential part of the power of eminent domain and, once necessity is determined by legislative act, no further finding or adjudication is required.Id.575 P.2d at 389;Londoner v. Denver,52 Colo. 15, 119 P. 156(1911).The determination of necessity by the condemnor is not reviewable by the judiciary absent a showing of fraud or bad faith.Colorado State Board of Land Commissioners v. District Court,163 Colo. 338, 430 P.2d 617(1967);Dallasta v. Department of Highways,153 Colo. 519, 387 P.2d 25(1963);Mack v. Highway Commission,152 Colo. 300, 381 P.2d 987(1963);Denver v. Board of Commissioners,113 Colo. 150, 156 P.2d 101(1945);Lavelle v. Town of Julesburg,49 Colo. 290, 112 P. 774(1911).This court has no authority to interfere with the condemnation powers of the State of Colorado or any other state.The Fourth Circuit in Baldwin v. Appalachin Power Co.,556 F.2d 241(4th Cir.1977)(quotingDixon v. West Virginia University Board of Governors,427 F.2d 12, 13(4th Cir.1970)) said:

Questions arising from the taking of property by condemnation for State purposes, are ordinarily matters for determination by the State courts.

A lease is a property right which, when taken for public use, has value for which the holder must be awarded just compensation.U.S. v. General Motors Corp.,323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311, 156 A.L.R. 390(1945) held that "property" within the Fifth Amendment includes every sort of right and interest the citizens may possess on which it is practicable to place a money value.The Tenth Circuit has also held that a lease is "property" within the meaning of the Fifth Amendment.U.S. v. Petty Motor Co.,147 F.2d 912(10th Cir.1945).Generally, a tenant is entitled to share in the condemnation award to the extent of his leasehold interest.2 Nichols, Eminent Domain, (3rd ed.) § 5.23 p. 35.However, the tenant may by contract waive his right to participate in a condemnation award.See,96 A.L.R.2d 1140.

Plaintiffs argue that there has been no condemnation proceeding instituted but concedes that the property was transferred by Best to the State of Colorado under the warranty deed of April 26, 1979.This contention is rejected.The absence of a judicial proceeding in condemnation does not support an argument that there was in fact no condemnation of the property.Once the legislative decision is made and the petition of condemnation is issued, the parties must resort to the courts only when they are unable to agree on an amount of "just compensation."Mulford v. Farmers Reservoir & Irrigation Co.,62 Colo. 167, 101 P. 301(1916);Interstate Trust Bldg. Co. v. Denver Urban Renewal Authority,172 Colo. 427, 473 P.2d 978(1970).In the instant action, the state and Best were able to reach an acceptable award and a judicial proceeding was avoided.There is no doubt, however, that had they not agreed on a just compensation, formal judicial condemnation proceedings would have been instituted.C.R.S.1973 § 38-1-102;City of Thornton, supra.The evidence shows that this transfer of title was not a mere sale, but a condemnation of the property.

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